CBDT notifies Cost Inflation Indexes with base year as 2001-02

CBDT notifies Cost Inflation Indexes with base year as 2001-02

• What is indexation/Cost of Inflation Index(CII)

Indexation/Cost of Inflation Index(CII) refers to measure of inflation; which is used for the adjustment in purchase price of an investment for the period for which it was held. This inflated cost(purchase price x CII) is considered as the purchase price(indexed value) while computing the capital gains arising from sale of the long term asset from the income tax perspective.

• What was the base year before the budget 2017

> The base year before the budget 2017 was 1981. Sothe purchase price of assets which were bought before April 1, 1981 were calculated on the basis of the fair market value of 1981 for the purpose of long term capital gain calculation.(Note : Investors have the option of considering either the fair market value or the cost of acquisition for computing capital gains. Choosing the higher value would result in lower tax burden.)

• What is the base year after the budget 2017

The base year afterthe budget 2017 has shifted to 2001 from 1981. Sothe purchase price of assets which are bought before April 1, 2001 will be calculated on the basis of the fair market value of 2001 for the purpose of long term capital gain calculation. (Note :investors have the option of considering either the fair market value or the cost of acquisition for computing capital gains. Choosing the higher value would result in lower tax burden.)This change has been made vide notification no. 44/2017 dated 5th June,2017.

• Who sets the Cost of Inflation Index(CII)

It is set by the Central Government every year and useful in calculating the indexed value of the capital assets which in turn helps an individual/tax payer to understand the actual long term gain or loss on selling of capital assets and at last allows the individual/tax payer to factor the impact of inflation on the cost of their asset.Lets have a look at new Cost of Inflation Index issued by Central Government vide notification no. 44/2017 dated 5th June,2017.

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MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 5th June, 2017

INCOME-TAX

S.O. 1790(E).In exercise of the powers conferred by clause (v) of the Explanation to section 48 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies the Cost Inflation Index as mentioned in column (3) of the Table for the Financial Years mentioned in the corresponding entry in column(2) of the said Table, namely:

TABLE
Sl.No.	Financial Year	Cost Inflation Index
(1)	(2)	(3)
1	2001-02	100
2	2002-03	105
3	2003-04	109
4	2004-05	113
5	2005-06	117
6	2006-07	122
7	2007-08	129
8	2008-09	137
9	2009-10	148
10	2010-11	167
11	2011-12	184
12	2012-13	200
13	2013-14	220
14	2014-15	240
15	2015-16	254
16	2016-17	264
17	2017-18	272

 

2. This notification shall come into force with effect from 1^st day of April, 2018 and shall accordingly apply to the assessment year 2018-19 and subsequent years.

 

[Notification No. 44/2017/F.No.370142/11/2017-TPL]

ABHISHEK GAUTAM, Under Secy. (Tax Policy & Legislation)

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Compiled by CA Ankita Khetan